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Spotify files complaint with European Commission against Apple

Spotify is filing a complaint against Apple with the European Commission, accusing the latter company of anticompetitive behaviour in the way it manages its App Store, and thus gives its own Apple Music streaming service an advantage over rivals.

“In recent years, Apple has introduced rules to the App Store that purposely limit choice and stifle innovation at the expense of the user experience—essentially acting as both a player and referee to deliberately disadvantage other app developers,” wrote CEO Daniel Ek in a blog post, as Spotify launched a dedicated Time to Play Fair microsite to illustrate its complaints against Apple.

“After trying unsuccessfully to resolve the issues directly with Apple, we’re now requesting that the EC take action to ensure fair competition. Apple operates a platform that, for over a billion people around the world, is the gateway to the internet. Apple is both the owner of the iOS platform and the App Store—and a competitor to services like Spotify. In theory, this is fine. But in Apple’s case, they continue to give themselves an unfair advantage at every turn.”

Ek cited the 30% “tax” on in-app purchases levied by Apple (although it drops to 15% once an individual subscriber has been paying for a year) suggesting that “if we pay this tax, it would force us to artificially inflate the price of our Premium membership well above the price of Apple Music. And to keep our price competitive for our customers, that isn’t something we can do”.

But Ek also said that if Spotify avoids in-app purchases “Apple then applies a series of technical and experience-limiting restrictions on Spotify. For example, they limit our communication with our customers—including our outreach beyond the app. In some cases, we aren’t even allowed to send emails to our customers who use Apple. Apple also routinely blocks our experience-enhancing upgrades. Over time, this has included locking Spotify and other competitors out of Apple services such as Siri, HomePod, and Apple Watch.”

Timeline of allegations

Spotify’s new micro-site goes into quite a bit of detail about these claims, including a timeline of its historical head-butting with Apple’s policies, from “When Apple launches their new Apple Watch, they dismiss our proposals and won’t work with us to develop an app for it” to this claim about 2016: “Now that Apple has Apple Music, rejections of the Spotify app start becoming more and more common, and they even go as far as threatening to remove us from the App Store. Those rejections seem to coincide with our promotional campaign seasons.”

Details of other rejections are also included: one in November 2017 triggered by mention of the ‘three months now for €0.99’ promotion; one in May 2018 for showing the word ‘Free’ in Spotify’s App-Store screenshots; and one in July 2018 for using the phrase “Get in, Get Premium”. Note, at this stage this is Spotify’s side of the story, with Apple yet to comment on these allegations.

Interestingly, Spotify also claims that Apple is now cracking down on podcasts. “So we announce two podcast acquisitions we are super excited about, and all of a sudden Apple arbitrarily decides to prohibit use of its API to recommend podcasts to users,” says the timeline.

‘We can’t even tell our users to get Premium…’

Spotify held a conference call with journalists at 10.30am UK-time this morning in which its general counsel Horacio Gutierrez provided some more context to the complaint.

“Apple uses its complete control over access to its App Store to deprive consumers of choice and disadvantage rival providers of audio streaming services, in particular Spotify, to the benefit of Apple’s own streaming service, Apple Music,” he said, in prepared remarks.

Gutierrez claimed that Apple’s restrictions on Spotify became “more frequent and more extreme” after the company acquired Beats Electronics (including its Beats Music streaming service) in 2014, and then relaunched the latter as Apple Music in 2015.

He also claimed that Spotify had been “pressured” into using Apple’s in-app purchases system in 2014, forcing the company to increase the cost of an iOS Spotify subscription to $12.99 a month to factor in Apple’s 30% cut – thus disadvantaging Spotify when Apple Music launched for $9.99 a month.

Gutierrez also talked more about the restrictions Spotify claims have been placed on it since it dropped in-app purchases on iOS.

“Apple’s rules dictate that we’re no longer to communicate with our own customers about what we consider to be pretty important stuff,” he said, citing promotional deals on subscriptions (Spotify’s annual ‘$0.99 for three months’ campaign being one example).

“We can’t even tell our users to get Premium, or give them tips on other ways in which they can upgrade outside the iOS platform. Apple has gone as far as prohibiting Spotify from emailing our users about ways they can subscribe to our Premium service,” he said.

Gutierrez also confirmed that Spotify has submitted an “economic analysis” to the European Commission showing the impact it believes Apple’s policies have had on its business. “We are confident that the evidence will show that even though we’ve been successful as a company, and have grown our business, we could have been even more successful if it were not for the restrictions that Apple has placed on our business,” he said. Spotify is not making this economic analysis public for now.

During the call, Music Ally asked whether Spotify plans to file a similar complaint in the US. “At this point we’re focused on this action before the European Commission, and that is what we are announcing today,” he said, promising more information on any action in the US “when there is something to announce, if there is ever something to announce”.

These companies have history

There’s history here though, stretching right back to the speculation back in 2009 over whether Apple would approve Spotify’s first iPhone app – it ultimately did, but only after several months’ speculation in the media about whether Spotify would be allowed onto the App Store.

In 2016, Spotify protested after Apple rejected its latest app update, which it claimed was due to “business model rules” surrounding Spotify’s promotion of a subscriptions offer on its own website – rather than using Apple’s in-app purchases. Gutierrez wrote to his counterpart at Apple Bruce Sewell claiming that “this latest episode raises serious concerns under both US and EU competition law”.

“It continues a troubling pattern of behaviour by Apple to exclude and diminish the competitiveness of Spotify on iOS and as a rival to Apple Music, particularly when seen against the backdrop of Apple’s previous anticompetitive conduct aimed at Spotify … we cannot stand by as Apple uses the App Store approval process as a weapon to harm competitors,” added Gutierrez.

Last August, Music Ally reported on Spotify’s decision to stop using Apple’s in-app purchases system for new subscribers. “It was possible to pay for Spotify Premium using Apple’s in-app payment system (iAP). However, this has been discontinued for new subscribers,” explained the company’s support website, which also gave existing subscribers advice on how to cancel their in-app subscription and then re-subscribe directly with Spotify.

There’s also history of Spotify protesting about the way Apple and other big-tech companies manage their platforms, from app stores to smart speakers. In

“Our collective experience is that where online platforms have a strong incentive to turn into gatekeepers because of their dual role, instead of maximising consumer welfare, they can and do abuse their privileged position and adopt B2B practices with adverse consequences for innovation and competition. These practices range from restricting access to data or interaction with consumers, biased ranking and search results to lack of clarity, imbalanced terms and conditions and preference of their own vertically integrated services.”

The European firms called for “clear and enforceable obligations that are a deterrent and prevent unfair businesses practices by platforms”, adding that “these obligations should include but go beyond mere transparency requirements, which alone will not ensure platforms act as gateways rather than become gatekeepers to the digital economy”.

“Even though the Commission has been looking at the topic of platforms in general, up until this point there wasn’t a complaint like the one we’re filing, that presented a particular set of facts concerning a particular company,” said Gutierrez in Spotify’s journalist conference-call today.

He added that while Spotify is filing the complaint, if the EC launches an investigation as a result, it will be able to solicit the opinions of other digital services. “We know that other companies in the industry feel equally frustrated with the restrictions that have imposed over time, but we will not speak for them.”

(Deezer’s spokesperson has since issued a statement from that company: “Streaming is one of the most competitive industries in the world. We fully support Spotify in wanting there to be a level playing field. Companies should be able to compete through innovation, content and customer focus. Right now that’s not the case. iOS and Apple users who love music streaming are disenfranchised, with higher fees and less realistic options as a result. We look forward to the European Commission’s response to Spotify and will follow the issue closely.”)

Spotify CFO Barry McCarthy has also talked about the “competitive advantage” that Apple’s ecosystem of devices and App Store provides it. He told Goldman Sachs’ Communacopia conference last September that Spotify’s strategy is “to build a bigger ecosystem in total than their phone, with partner companies like Samsung, Microsoft, and the Android operating system – which is substantially bigger outside the United States than iOS… and have our success across those platforms enable us to compete. If we do that well, I think our business will prosper. If we don’t? Roadkill”.

Spotify’s action today is an attempt to enlist European regulators to help it avoid such a stuck-to-the-tarmac fate in the future.

It’s also an issue that’s live in the US as well as Europe. Last November, Amy Wang at Rolling Stone published a story about a long-running non-music consumer lawsuit – Apple v Pepper – focusing on Apple’s App Store policies.

At the time, Wang suggested that any decision in that case that Apple had an ‘unlawful monopoly’ on its store could pave the way for “putting non-Apple music streaming services on equal footing with Apple Music” – freeing them from having to pay it 30% (or 15% once someone’s been paying for a year) of every in-app subscription.

Just this month, Elizabeth Warren – one of the politicians hoping to win the Democrat nomination for next year’s presidential election in the US – outlined proposals to break up big technology companies, including Apple. “Either they run the platform or they play in the store. They don’t get to do both at the same time,” she told The Verge.

Today’s news means Spotify will have its hands full, legally, in the coming months. The company is already enmeshed in a row with music publishers in the US, over its decision to appeal against new royalty rates for songwriters set by the US Copyright Royalties Board. Plus there’s the small matter of the latest set of renewals of Spotify’s licensing deals with major labels, which are also due this year.

(Spotify will inevitably face suggestions that the timing of its complaint against Apple is related to the furore in the US over its songwriter-royalties appeal. On the media call, Gutierrez denied that when asked, pointing to the length of time it takes to compile a complaint of this nature. “The two issues are completely unrelated.”)

“This is not about picking a fight. this is not about Spotify versus Apple. but we also believe we have no other choice,” said Gutierrez. “This is about protecting competition for both businesses and consumers, because Apple’s actions are in violation of the law and we are convinced they will hurt consumer choice and innovation in the long term.”